DO WE NEED BANKS

The rising popularity of cryptocurrencies has got banks worried. It is quite clear that banks are major stakeholders in the debate on digital currencies. Governments have been dragging their feet for too long but, cryptocurrencies have kept growing all this time. GLITZKOIN is of the firm opinion that, banks in their current form and role will no longer be necessary if, there is a total or very wide acceptance of cryptocurrencies.

The objective of digital currencies is to allow peer-to-peer money transfers at a very low cost. The term crypto was derived from the word ‘cryptography’ which means to encrypt or code, a text or message. Crypto currencies are implemented over blockchain technology, all information related to a transaction is encrypted. When we talk about peer-to-peer money transfers, we have already excluded banks and the banking process from our discussion.

Blockchain technology is all about decentralization, events and transactions can happen without the need for a central governing or controlling authority. Cryptocurrencies can move up and down the blockchain without, using the services of a bank. As is generally the case, a participant holding crypto coins, can cash them by transferring (downloading) them to his or her bank account. When we arrive at a point where, cryptocurrencies are widely accepted, crypto currency that we own can be used to pay for other products and services. This will diminish the need to cash them into conventional money.

Money transfer is conventionally conducted through the banking systems, the sending and receiving banks could be in two different countries. Banks charge transfer fees and this moves up as the amount of money transferred increases. Interestingly this is one of the main reasons why, the GLITZKOIN project took shape. The project plan includes the development of a blockchain based, diamond trading platform. A cryptocurrency is implemented to handle payments to be made on the trading platform. Diamonds are extravagantly priced, handling payments using the banking system results in stiff bank charges. The use of a crypto currency would eliminate the need for utilizing banking services in the transfer process.

International trade involves different currencies, money moving from the buyer to the seller can sometimes involve two or even three currency conversions. And the banks smile all the way as they, bill the parties involved for currency conversions. Managing trade using a crypto currency, will remove the hassle and cost of currency conversions.

From the view point of business, crypto currencies will increase efficiency and reduce the cost of settling payments and receipts. Banks on the other hand will see their revenues fall, their role in business development will also keep shrinking.

We are some distance away from gaining total acceptance of crypto currencies across nations and industries. The good news is that, many governments realize that the crypto world is bound to grow with or without their support. This is encouraging nations to develop rules, regulations and laws related to crypto world trading. This is a positive move since, we all deserve to harness the benefits that new financial innovations bring.

Banks have been blockading progress in the crypto world. Governments realize that clear cut laws need to be established to govern the crypto currencies, banks might soon be left alone on the sidelines. It is time banks carved a positive and useful role for themselves in the newly evolving financial sector. Conventional bank transactions will never become extinct but, they could show a significant reduction. Banks could position themselves as crypto currency exchanges. They could buy and sell a wide range of crypto currencies but, fees and charges will need to be kept to the bare minimum.

And if banks continue to play their existing roles and try to destroy, the nascent market for crypto currencies, they have themselves to blame. We will in the near future be able to live and conduct business without, the need for an outdated and inflexible banking system.